Alec Levenson of CEO Reveals what Companies are doing to Maximize Employee Engagement and Productivity

December 19, 2013 • by News at Marshall

Alec Levenson, Senior Research Scientist at the Center for Effective Organizations (CEO) at USC’s Marshall School of Business, led the research team that worked with Frito-Lay, recent recipient of the 2013 Human Resource Management Impact Award from the Society for Human Resource Management and the Society for Industrial & Organizational Psychology. Frito-Lay partnered with Marshall’s CEO to evaluate its new compensation program which determines compensation based on meeting sales-growth targets. The goal was to ensure that the change would have the intended impact before rolling it out in 2013. Here, Levenson discusses the significance of doing scientific evaluation of HR programs and what other organizations can learn from taking a more data-based approach to people decisions.

Marshall News: What do you do at CEO?

Alec Levenson: We work with leading companies using action research to help build more effective organizations. Our team of researchers works on issues ranging from organization design to human resource management to leadership development to sustainability. Our work is different from other applied research centers and consulting organizations in how we partner with companies to rigorously assess the relevant and strategic issues facing them, applying proven interventions guided by that assessment and evaluating the effectiveness of the engagement.

MN: What areas of HR are making the biggest difference for companies/are the most talked about?

AL: A basic problem in organizations today is that companies make HR decisions—work design, training programs, skill development, compensation design—that involve hundreds of millions of dollars of expenditure that often have no scientific basis behind them. There is growing interest in evidence-based management—making decisions about people and processes based on scientific evidence, not heuristics. The problem is that talk is cheap and evidence is hard to come by. Careful scientific evaluation can be expensive and time consuming to gather, so in the vast majority of cases HR decisions are based on common practices—what other companies are doing—and/or the gut feel of senior executives. Yet when companies do take the time to carefully evaluate their HR decisions, they often find that the factors impacting employee motivation and productivity are different than key stakeholders often assume is the case.

MN: How are companies doing those evaluations?

AL:Through both in-house and external efforts. In house, more and more companies are building dedicated HR analytics groups. They are staffing them with combinations of HR professionals who are more analytically inclined and business savvy, and with people who have advanced analytical training. At CEO we’ve spent the past decade studying this transformation of the HR function, working with and training people in those roles to be more effective with their analysis.

Not all companies can afford to build big analytics groups – and even the ones that do cannot staff so deeply that they can address all topics that come up. So there is a growing demand for external experts to provide analytics help on people and process issues. A lot of the work that we do at CEO adds expert analytics value to the work done internally.

MN: Is that what you did for Frito-Lay when you evaluated their compensation program?

AL:Yes. We helped design an experiment with very careful measurements in order to understand the impact of their new compensation program for their 19,000 route sales representatives. The research allowed the company to much more closely align their goals with the workers’ incentives. That’s one of the reasons why it’s been successful. This kind of careful scientific measurement was a big deal, and allowed the company to make the right decision about a group of employees on whom they spend an enormous amount of money.

MN: What can other companies learn from this?

AL: The lesson learned is about the value of careful measurement. This was a big change; without data to show the evidence of what had taken place, there is a good chance that an internal case for changing the compensation system could not have been made. That would have meant leaving on the table a lot of money they could have made by intentionally improving employee incentives. Any time an organization has a change in a fundamental part of the job that people do, it can be a really risky proposition. This kind of careful evaluation is critical prior to making a change in order to ensure the desired impact.

MN: What are you researching next?

AL: How companies can successfully compete in emerging markets. Everyone knows that the biggest, fastest growing markets are in China, India, Indonesia, Brazil, Turkey, Mexico, etc. What is little known are which organizational and talent strategies are the ones to use to enable both short and longer-run success.

About the USC Marshall School of BusinessConsistently ranked among the nation's premier schools, USC Marshall is internationally recognized for its emphasis on entrepreneurship and innovation, social responsibility and path-breaking research. Located in the heart of Los Angeles, one of the world's leading business centers and the U.S. gateway to the Pacific Rim, Marshall offers its 5,700-plus undergraduate and graduate students a unique world view and impressive global experiential opportunities. With an alumni community spanning 123 countries, USC Marshall students join a worldwide community of thought leaders who are redefining the way business works.